What does a Fed Rate Hike Really Mean for CRE?

There are widespread expectations that the Federal Reserve will raise rates later this year; in fact, many think it’s going to occur next month. So exactly how will this increase in rates affect commercial real estate? The better question is why are interest rates rising?

If it’s because the U.S. is perceived as a riskier investment than other countries, causing people to sell bonds (making yields rise), then projected economic growth for the U.S. isn’t so rosy. Fortunately, that’s not the case. Our economic recovery has been self-sustaining and continues to strengthen, and while we haven’t hit the Fed’s 2% inflation target, it appears we no longer need a boost from historically low interest rates.